Diminishing Returns
The project:
The influence of asset managers and private equity firms stretches across the globe and into the very foundations of our societies. Diminishing Returns takes a close look at what happens when your elderly parents’ retirement home, the nursery where you drop your children, or the company that pipes water into your kitchen is taken over by an increasingly intricate and deregulated industry, and profiles the hidden figures who are reshaping our economies and our lives.
From Diminishing Returns:
Nils Jansson was a strange business partner for Blackstone, the largest commercial landlord in history, given that they preferred to be regarded as a careful steward of pension pots rather than an impulsive Monopoly man. The entire population of Denmark is just over half the size of London, and its real-estate industry is dominated by a tight-knit group of professionals with august credentials. Jansson was an outsider. He came from Holbæk, a hefty harbor town, and studied farming at agricultural college in the early 2000s. He worked for a catering company and then as a manager in a construction firm, finding himself in Copenhagen during the biggest financial boom of the 21st century. Jansson had a hustling, enthusiastic energy, which earned him the nickname “Speedy.” “In the olden days,” said one property investor who used to work with him, “we used to say he could charm a cow out of a flower field.”
Real estate finance can be complicated. What Jansson did was simple. Before the financial crisis, he bought properties from a group of investors who sold buildings to one another at vastly inflated prices. Jansson would buy rundown buildings—“some old crap” as he once put it—then renovate them and sell them on. Eik Bank, a Faroese bank with branches in Denmark, gave Jansson huge loans to buy properties on the basis it would receive a bonus once they were sold. This was legal but extremely risky. The loan depended on the value of properties continuing to rise, while the bonus was a seductive promise that gave bankers an incentive to overlook risk.
Jansson became a big customer at Eik Bank. When the real estate market slowed down in 2009 and the banks stopped lending him money, Jansson went bankrupt. One year later, Eik Bank declared insolvency and was taken over by the state. After the crash, Jansson mostly disappeared from public view. He moved on to a farm and acquired a herd of cattle. He told a journalist that he spent most of his time digging ditches and had no plans to ever start trading real estate again. Among those who had followed the story, “Speedy” was emblematic of the risks and excesses that had caused Denmark’s financial crisis.
Blackstone’s decision to partner with Jansson was like Lloyds of London moving to the US and deciding to go into business with a bankrupt farmer.
From Hettie O'Brien's previous reportage for the Guardian, "The Blackstone rebellion: how one country took on the world’s biggest commercial landlord," September 29, 2022.
The grant jury: In swift-moving, lucid prose, Hettie O’Brien makes exceedingly complex financial arrangements not just intelligible, but riveting. She marshals an impressive trove of international research, including hard-won interviews with notoriously elusive financiers, to reveal who is pulling the strings of society, and how. With O’Brien’s eye for a telling quote and gifts of characterization, Diminishing Returns will be an animated and momentous contribution to the ongoing debate about what we can rightly expect from government; it asks, cogently, whom it shields and whom it abandons.
Hettie O'Brien is an Assistant Opinion Editor at the Guardian and a contributing writer to the Guardian Long Read. She has previously worked for the New Statesman, where she covered economic and social affairs, and as a reporter in Washington, DC, covering corporate monopolies and the Federal Trade Commission. Before becoming a journalist, she worked as a researcher for Rethinking Economics. She has written about economics, politics, and culture for The Times Literary Supplement, The Baffler, The Atlantic, and The Architectural Review, has contributed to radio, including the BBC World at One, and has chaired panels at the Design Museum and Royal Society of Arts. She lives in London.